Bharadwaj Institute Pvt Ltd.
Assignment on
www.bharadwajinstitute.com
Ratio Analysis
9841537255
Time 3 ½ hours
Complete before 20th August 2012
You shall workout the answers in Notebook itself.
1. From the following information provided by Jolly Ltd., you are required to prepare the balance sheet :
Current ratio
Liquidity ratio
Proprietary ratio
Working capital
Reserves and surplus
Bank overdraft
2.5
1.5
0.75
Rs.6,00,000
Rs.4,00,000
Rs.1,00,000
There is no long-term loan or fictitious assets. You are also required to show the necessary working notes.
CS December 2009
2. Summarised income statement and balance sheet of Progressive Ltd. are given below :
Income Statement for the Year ended 31st December, 2009
(Rs. ’000)
Sales
1,600
Less: Cost of goods sold
1,310
Gross margin
290
Less: Selling and administration expenses
40
Net operating income (EBIT)
250
Less: Interest
45
Earnings before tax
205
Less : Tax paid
82
Net income after tax
123
Earnings per share (EPS) is Rs. 3.075.
Balance Sheet as at 31st December, 2009
Liabilities
(Rs. ’000)
Paid–up capital (40,000 shares of Rs. 10 each fully paid)
400
Retained earnings
120
Debentures
700
Creditors
180
Bills payable
20
Other current liabilities
80
1500
Assets
Net fixed assets
(Rs. ’000)
800
Inventory
400
Debentures
175
Marketable securities
75
Cash
50
1500
Market Price per share is Rs.15.
Industry’s average ratios are :
Current ratio
(i)
.......... 2.4
Quick ratio
.......... 105
Sales to inventory
.......... 8.0
Average collection period
.......... 36 days
Price per share/book value of share
.......... 1.6
Debts to assets
.......... 40%
Times interest earned
.......... 6
Profit margin
.......... 7%
Price to earnings ratio
.......... 15
Return to total assets
.......... 11%
Progressive Ltd. would like to borrow Rs.5,00,000 from a bank for less than a year. Evaluate the firm’s
current financial position by calculating ratios that you feel would be useful for the bank’s evaluation.
(ii) What problem areas are suggested by your ratio analysis ? What are the possible reasons for them ?
(iii) Do you think that the bank should give the loan ?
(iv) If Progressive Ltd.’s inventory utilisation ratio (sales to inventory) and average collection period were
reduced to industry average, what amount of funds would be generated ?
CS June 2010
3. Following are the ratios to the trading activities of National Traders Ltd.:
Debtor’s velocity
3 months
Stock velocity
8 months
Creditor’s velocity
2 months
Gross profit ratio
25%
Gross profit for the year ended 31st December, 2009 amounting to Rs.4,00,000.
Closing stock of the year is Rs.10,000 more than the opening stock.
Bills receivable amount to Rs.25,000.
Bills payable amount to Rs.10,000.
Find out
(i)
(ii)
(iii)
(iv)
Sales;
Sundry debtors;
Closing stock and;
Sundry creditors.
CS June 2011
4. From the following information pertaining to ABC Ltd., prepare its trading, profit and loss account
for the year ended 31st March, 2011 and summarised balance sheet as at that date :
Current ratio = 2.5
Quick ratio (quick assets/quick liabilities) = 1.3
Proprietary ratio (fixed assets/proprietary funds) = 0.6
Gross profit to sales ratio = 10%
Debtors velocity = 40 days
Sales = Rs. 7,30,000
Working capital = Rs. 1,20,000
Bank overdraft = Rs. 15,000
Share capital = Rs. 2,50,000
Closing stock = 10% more than opening stock
Net profit = 10% of proprietary funds.
CS December 2011
5. From the following information relating to ND Ltd, prepare a Balance Sheet as on 31.12.2007.
Current Ratio — 2
Reserve & Surplus/share capital — .25
G.P. Ratio — 25%
Net working Capital — Rs. 4,00,000
Fixed Assets/shareholders’ net worth — .60
Average Debt collection period — 2 months
Cost of sales/closing stock — 9 times
Liquid Ratio — 1.5
CWA Inter December 2008
6. The following extracts of financial information relate to Complex Ltd:
(Rs. in lakhs)
Balance Sheet as at 31st March
2008–09
2007–08
Rs.
Rs.
10
10
Share Capital
30
10
Reserves and Surplus
60
70
Loan Funds
100
90
Fixed Assets (Net)
30
30
(Rs. in lakhs)
Balance Sheet as at 31st March
2008–09
2007–08
Rs.
Rs.
Current Assets:
Stock
Debtors
Cash at Bank
Others Current Assets
Less: Current Liabilities
Net
Total Assets
Sales (Rs. lakhs)
30
30
10
30
100
30
70
100
270
20
30
20
10
80
20
60
90
300
(i) Calculate for the two years Debt Equity Ratio, Quick Ratio and Working Capital Turnover Ratio.
(ii) Find the Sales volume that should have been generated in 2008–09 if the company were to have
maintained its Working Capital Turnover Ratio.
Note: All Current Liabilities are quick liabilities.
CWA Inter June 2009
7. From the following information, you are required to calculate the amount of net worth, current
liabilities, long– term debt. fixed assets, current assets, inventory and debtors:
Current ratio — 2.5 : 1
Sales/Net worth — 4 times
Sales to Inventory — 20 times
Annual sales — Rs. 40,00,000
Reserves and surplus — Rs. 3,50,000
Net worth/current liabilities — 5 times
Fixed assets to net worth — 75%
Total debts to Proprietors’ ratio — 50%
Debtors velocity — 12 times
Fictitious assets — Rs. 50,000
75% of sale were on credit.
CWA Inter June 2011
8. Using the following information, complete the.Balance Sheet of Shekhar Ltd. as on 31st March, 2011:
(i) Sales Rs. 36,00,000
(ii) Gross Profit Ratio 25%;
(iii) Total Assets Turnover: 3 times
(iv) Fixed Assets Turnover: 5 times
(v) Current Assets Turnover: 7.5 times
(vi) Inventory Turnover: 20 times
(vii) Debtors' Turnover: 18 times
(viii) Current Ratio 1.8 : 1
(ix) Total Assets/Net worth-2.25 : 1
(x) Debt (long term)–Equity 0.75: I
Turnover ratios are based on cost of goods sold except Debtors’ turnover
Balance Sheet as on 31 st March, 2011
Liabilitites
Equity (net worth)
Long term Debt
Current liabilities
Amount
Rs.
Assets
Amount
Rs.
Fixed Asset
Current Assets
Inventories
Debtors
Cash in hand & bank
CWA Inter December 2012